CTG sees lower 2Q, full-year revenues

CTG has updated its financial forecast for 2014 and the Buffalo-based information technology staffing and solutions company is expecting a slowdown in business.

Preliminary earnings for the 2014 second quarter are expected to be 20 cents per share, down from previous projections of 22 cents per share. Officials said the revised downward figures are due to an increase in medical costs based on significantly higher-than-expected claims in the quarter from its self-insured medical plan.

Revenue for the second quarter is expected to be approximately $100 million, slightly below the $101 to $103 million guidance, due to lower than anticipated revenue from the CTG’s staffing business (NASDAQ: CTG).

For the 2014 full year, revenue guidance has been changed to a range of $390 to $400 million, down from $400 million. Net income for 2014 is now projected to range from 75 to 81 cents per share compared with the previous guidance of 83 to 91 cents per share. The changes primarily reflect the higher medical costs in the second quarter and an increase in the budget for medical expenses for the rest of the year as well as isolated pricing pressures from one of the company’s larger staffing clients. The revised guidance includes the previous estimate of 18 cents per share from the sale of $6 million in data analytics solutions.

Of the revisions, CTG Chairman and Chief Executive Officer James Boldt said: “The increase in medical expenses from our self-insured employee medical plan was due to much higher utilization of the plan in the 2014 second quarter which reduced net income for the quarter by two cents per share. Absent these higher than expected costs, CTG’s second quarter earnings would have met our initial guidance for the quarter. While this higher level of medical expense may be an anomaly to the second quarter, to be prudent, we are increasing our projected medical costs for the rest of the year. While most of the earnings reduction relates to higher medical expense, we have also made adjustments in our earnings guidance for the full year based on some rate renegotiations in our staffing business. The reduction in revenue for the year is a result of slightly lower demand for our staffing business than previously projected.”